European Defense Procurement Worries: German Army Angry over EADS Delays and Technical Glitches

European Defense Procurement Worries:German Army Angry over EADS Delays and Technical Glitches

By SPIEGEL Staff

Frustration is mounting in the German armed forces about defense contractor EADS, whose products are beset by delays and technical problems. The A400M military aircraft is the latest in a long line of examples.

Angela Merkel was in a resolute mood. German defense contractors liked to talk about "patriotism," the chancellor declared irritably when Defense Minister Franz Josef Jung and top military officials came to her complaining about delays in the supply of combat jets, helicopters and other equipment. "So we can't have the army spending years waiting for its equipment."

"It's time more pressure was put on industry," she declared, in an unmistakable instruction to Jung to get tough with defense suppliers.

DDP

The A400M during a presentation in Seville in 2008.

But Merkel doesn't seem to be sticking to her own line. More than a year after that meeting in her office in Berlin, all it took was a telephone call and a meeting with French President Nicolas Sarkozy for the chancellor to cave. The two leaders were discussing the military transport aircraft A400M built by the Airbus parent company EADS, a Franco-German defense giant that enjoys a quasi-monopoly in Europe's aerospace industry. The A400M has been subject to so many delays and glitches that Europe's defense ministers threatened in March to cancel their deal to buy 180 planes at a price of 110 million ($158 million) each.

But Angela Merkel undermined her own people. She and Sarkozy
shelved the cancellation threat in June before the company had even acceded to demands from European ministers that it provide "transparency" on technical problems, costs and on the reorganization of its management.

So the ministers had no option but to postpone the deadline for negotiations until the end of the year. No defense official in Berlin or Paris still believes that the countries will end up cancelling the contract and forcing EADS to pay back 6 billion.

The monopolist giant now has a firm grip on its customers. "We need a transport aircraft," Merkel said in Paris. The Transall aircraft that are due to be replaced by the A400M are 40 years old and rickety. The German army has ordered 60 of the new aircraft for more than 8 billion including equipment.

History of Shortcomings

When it comes to EADS, the German army always fights a losing battle. No supplier is as frowned on among German military top brass as EADS. Many of the products the company offers arrive later, perform less well and turn out more expensive than expected. Be it "Eurofighter" jets, combat helicopters, transport helicopters, electronic equipment for frigates or infantry equipment -- EADS almost always gets a chunk of government defense contracts, but it's rare that its products work the way they should.

Nevertheless, German budget committees under conservative Christian Democrat and center-left Social Democrat-ruled governments have kept on approving fresh cash. Defense managers and government officials tend to warn that that cancelling an order would jeopardize Germany's reputation as a reliable business partner. Or the lobbyists make dire warnings about the loss of thousands of jobs.

The chairman of parliament's budget committee, Otto Fricke of the opposition pro-business Free Democratic Party (FDP), wants parliament to be involved in any further decisions regarding the A400M. "We don't want to be degraded to a rubber-stamping club like with previous defense contracts," he said. EADS, he warned Jung, "mustn't have carte blanche."

That realization comes pretty late given that when the FDP was still in government, it also tended to approve questionable projects. Loyalty to the coalition took precedence over business sense, for example in the case of the controversial "Eurofighter" jet. In the 1980s, Franz Josef Strauss, then leader of the Bavarian conservative Christian Social Union party, and Defense Minister Manfred Wörner both promoted the project. The plan was to order at least 200 "Jäger 90" jets, and they were to be ready for use from 1997. One fighter was to cost around 83 million deutsche marks including spare parts.

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